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Case 1:14-cv-01287-RBW Document 1 Filed 07/29/14 Page 1 of 33

IN THE UNITED STATES DISTRICT COURT FOR


THE DISTRICT OF COLUMBIA
STATE OF WEST VIRGINIA,
EX REL. PATRICK MORRISEY
in his official capacity as
Attorney General of West Virginia
State Capitol Building 1, Room E-26
Charleston, WV 25305;
Civil Action No. 14-1287
Plaintiff,
v.
UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES
200 Independence Avenue, SW
Washington, D.C. 20201
Defendant.
COMPLAINT
1.

This case involves core questions about the rule of law and the proper role of the

President and the States in our system of government.


2.

The Constitution prohibits the President from picking and choosing the laws that

he enforces based on political convenience. The President has specified and defined authority to
veto legislation, in its entirety, before it becomes law. See U.S. Const. art. I, 7; see also
Clinton v. City of New York, 524 U.S. 417 (1998). But after a bill becomes the law of the land,
the Take Care Clause of the Constitution requires that the President faithfully execute[] the
law. U.S. Const. art. II, 3.
3.

President Obama and his agencies, however, have demonstrated a consistent and

ongoing pattern of unlawfully and unilaterally amending or suspending the enforcement of duly
enacted federal statutes to achieve the Administrations political agenda. Examples include the
halting of federally mandated deportations for certain undocumented immigrants, the suspension

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of the federally mandated welfare work requirement, the granting of healthcare premium
subsidies to congressional employees, and the provision of retroactive subsidies towards
insurance purchased outside of the ACAs exchanges.
4.

The Administration has also demonstrated a pattern of ignoring unambiguous

statutory limitations on its authority, when such statutory limitations conflict with the
Administrations political or policy goals.

Most recently, the Presidents Environmental

Protection Agency (EPA) has proposed to regulate existing coal-fired power plants under
Section 111(d) of the Clean Air Act, 42 U.S.C. 7411(d), notwithstanding EPAs admission
that the literal terms of the Clean Air Act prohibits exactly such regulations.
5.

This case challenges one such unlawful actionthe so-called Administrative

Fix of the Patient Protection and Affordable Care Act (ACA)by which the President has
sought to shift to the States the burden and political responsibility for the cancellation or
approval of individual health plans that do not comply with several requirements created by the
Presidents signature law.
6.

The State of West Virginia believes that its citizens should be able to keep their

individual health insurance plans if they like them. But the State also believes that no President
is above the law and that this Administrations actions set a dangerous precedent. The changes
in the law necessary to ensure that the States citizens and all Americans can keep their desired
plans must be obtained properly through the democratic process and in accordance with the
legislative procedures set forth in the Constitution.
7.

Last fall, the President finally admitted thatcontrary to the repeated promises he

made to the American peoplethe ACA makes many Americans individual health plans
unlawful to renew after January 1, 2014, and subject to stiff federal penalties. Rather than work

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with Congress to amend the ACA so that federal law would no longer require those plans to be
cancelled, however, President Obama and his agencies instead instituted the Administrative Fix.
8.

Adopted without any advance notice or opportunity for public comment, the

Administrative Fix unilaterally suspends federal enforcement of the ACA against individual
plans made illegal by the ACA and fundamentally transforms what Congress intended to be a
regime of cooperative federalism. Prior to the Administrative Fix, the ACA gave the States
the option of enforcing the laws federal requirements against non-compliant individual health
plans, but required the federal Department of Health and Human Services to enforce the
requirements if the States declined to do so. The States thus had no authority over whether the
federally mandated requirements would ultimately be enforced. But under the Administrative
Fix, HHS abdicated its enforcement role and left the States solely responsibleand
accountablefor deciding whether federal law would be enforced.
9.

With the Administrative Fix, the President intentionally and improperly sought to

shift to the States the potential political burden for the cancellation of individual health plans. In
announcing the new rule, he explained his desire to be able to say to these folks, you know
what, the Affordable Care Act is not going to be the reason why insurers have to cancel your
plan. He stressed that after the Administrative Fix, it would be state insurance commissioners
[who] still have the power to decide what plans can and cant be sold in their states. Although
the ACA still makes it unlawful to renew an individual plan that does not comply with the laws
federally mandated market requirements, the President has attempted to transfer the legal and
political responsibility to the States by giving them exclusive authority to determine whether to
actually enforce the ACAs prohibition.
10.

The Administrative Fix is an unlawful agency rule for several reasons.

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a.

First, it is contrary to the ACA. Under the ACAs enforcement scheme,

HHS shall enforce the Acts eight market requirements against individual health plans
if the States do not do so. Put another way, the ACA sets up a mandatory regime of
cooperative state/federal enforcement. The Act prohibits HHS from leaving enforcement
discretion over the ACAs eight federal market requirements solely to the States.
b.

Second, the Administrative Fix was promulgated without public notice and

opportunity to comment as required by the Administrative Procedure Act.


c.

Third, the Administrative Fix constitutes unlawful delegation of federal

executive and legislative powers by the Executive Branch to States.


d.

Fourth, the Administrative Fix violates the States sovereignty under the

Tenth Amendment and interferes with constitutional principles of federalism. By making


States solely responsible for determining under federal law whether plans made illegal by
the ACA must be cancelled, the President has unlawfully conscripted States into federal
service, making them part of the federal regulatory system and deliberately
diminish[ing] the accountability of . . . federal officials at the expense of the States.
New York v. United States, 505 U.S. 144, 168 (1992).
11.

The State of West Virginia seeks judicial intervention against the Administrative

Fix to vindicate the rule of law and protect itself from the harm of becoming the sole enforcer of
federal law. While consumers should be able to keep their health plans and States should be
allowed to exercise their enforcement authority as they so choose, the President cannot ignore a
duly enacted federal law or make the States exclusively responsible for enforcing that law.

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THE PARTIES
12.

Plaintiff the State of West Virginia is a sovereign State that regulates health

insurance within its borders through duly enacted state laws administered by state officials and
constituent agencies.
13.

It appears by and through Patrick Morrisey, Attorney General of West Virginia.

14.

Defendant U.S. Department of Health and Human Services (HHS) is an

executive, Cabinet-level agency of the United States within the meaning of the Administrative
Procedure Act. See 5 U.S.C. 551(1) (APA). HHS and its sub-agencies are charged with
administering many of the provisions of the Patient Protection and Affordable Care Act, Pub. L.
No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and Education Reconciliation
Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010) (codified as amended in scattered
sections of the code). Those sub-agencies within HHS include the Centers for Medicare and
Medicaid Services (CMS) and the Center for Consumer Information and Insurance Oversight
(CCIIO).
15.

The relief requested in this action is sought against: the Defendant; the

Defendants officers, employees, and agents; and all persons acting in cooperation with the
Defendant or under the Defendants supervision, direction, or control.
JURISDICTION AND VENUE
16.

This case arises under the APA, 5 U.S.C. 701-706, and under the Constitution

and laws of the United States.


17.

This Court has federal-question jurisdiction under 28 U.S.C. 1331 and 1341.

18.

The Court may award declaratory and injunctive relief under the APA, as well as

28 U.S.C. 1361, 22012202 and Federal Rules of Civil Procedure 57 and 65.

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19.

Venue is proper under 28 U.S.C. 1391(b) and (e)(l) because the Defendant is an

agency of the United States and resides in this district.


FACTUAL ALLEGATIONS
A. The ACAs Eight Federally Mandated Market Requirements
20.

Under the ACA, all individual health insurance plans begun or renewed after

January 1, 2014, must comply with eight federally mandated market requirements, unless they
qualify for the grandfathering exception. 42 U.S.C. 300gg 300gg-6, 300gg-8; id. 18011;
see also ACA 1255 (effective for plan years beginning on or after January 1, 2014).
21.

While the ACA as a whole imposes many mandates on many actors, these eight

federally mandated market requirements relate to fair health insurance premiums; guaranteed
availability of coverage; guaranteed renewability of coverage; the prohibition of pre-existing
condition exclusions or other discrimination based on health status; the prohibition of
discrimination against individual participants and beneficiaries based on health status; nondiscrimination in health care; comprehensive health insurance coverage; and coverage for
individuals participating in approved clinical trials. 42 U.S.C. 300gg 300gg-6, 300gg-8.
22.

As described more fully below, federal law creates an enforcement regime that:

(a) permits the States the first opportunity to voluntarily enforce these federally mandated market
requirements by restricting the issuance of non-compliant individual health plans; and (b)
requires Defendant HHS to enforce the requirements if the States do not do so. 42 U.S.C.
300gg-22; see also 78 Fed. Reg. 13406, 13419.
23.

The regime resembles an arrangement used in other federal lawscalled

cooperative federalismin which States are given the chance to voluntarily participate in the

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application of federal standards but are backstopped by mandatory enforcement by the federal
government if the States choose not to enforce them.
a. Voluntary State Enforcement Against Insurers
24.

Every State has long had the authority to restrict the sale of individual insurance

plans in his or her State. E.g., W. Va. Code 33-6-8; see also id. 33-2-10 (listing the States
authority to regulate the insurance market and protect the interests of policyholders).
25.

Consistent with this pre-existing role in regulating health insurance, see, e.g., 15

U.S.C. 1011, 1012, federal law grants the States the initial opportunity to voluntarily enforce
the ACAs eight federal market requirements against the issuers of individual insurance plans,
see 42 U.S.C. 300gg-22(a)(1) ([E]ach State may require that health insurance issuers . . . meet
the requirements of this part.).
26.

Soon after Congress enacted and the President signed the ACA, many States

indicated whether they intendedconsistent with their own state lawsto enforce some or all of
the eight federally mandated requirements.

See, e.g., National Association of Insurance

Commissioners, Survey on State Authority to Enforce PPACA Immediate Implementation


Provisions (Aug. 5, 2010), http://www.naic.org/documents/index_health_reform_section_
ppaca_state_enforcement_authority.pdf (attached as Exh. 1).
b. Mandatory Federal Enforcement Against Insurers
27.

In contrast to the States, Defendant HHS has no discretion under federal law

whether or not to enforce the Acts eight federal requirements against insurers who issue
individual health insurance plans.
28.

If a State does not enforce the eight federally mandated market requirements, the

Secretary of HHS must make a determination of such nonenforcement, at which point the

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Secretary [of HHS] shall enforce [the provisions of this part] insofar as they relate to the
issuance, sale, renewal, and offering of health insurance coverage. 42 U.S.C. 300gg-22(a)(2)
(emphasis added); see also 45 C.F.R. 150.203 (requiring CMS enforcement (emphasis
added)).
29.

Federal enforcement entails the possibility of significant fines on noncompliant

insurers. The Secretary may fine violators up to $100 per day per individual affected by the
insurers noncompliance. 42 U.S.C. 300gg-22(b)(2)(C); see also 45 C.F.R. 150.315.
30.

If an insurer fails to pay a penalty after it has exhausted its administrative and

judicial review, the Secretary shall refer the matter to the Attorney General for legal action. 42
U.S.C. 300gg-22(b)(2)(F)(ii).
31.

Furthermore, the funds gained from enforcement actions are specifically

earmarked to finance future HHS enforcement. 42 U.S.C. 300gg-22(b)(2)(G) (providing that


penalties paid to the Secretary (or other officer) imposing the penalty . . . shall be available. . .
for the purpose of enforcing the provisions with respect to which the penalty was imposed).
B. The Grandfathering Exception to the Acts Eight Federally Mandated Market
Requirements
32.

The Affordable Care Acts grandfathering provision provides the lone exception

to the Acts mandate that all individual health insurance plans comply with the Acts eight
federally mandated market requirements.
33.

As interpreted by an HHS rule, the grandfathering provision exempts individual

health insurance plans that were in existence on March 23, 2010 and have not been significantly
modified.
a.

Under Section 1251 of the Act, individual health insurance plans already

in existence on March 23, 2010 need not comply with the eight federally mandated

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requirements. See 42 U.S.C. 18011(1) (Nothing in this Act . . . shall be construed to


require that an individual terminate coverage . . . in which such individual was enrolled
on March 23, 2010.).
b.

But HHS has issued a rule that removes from eligibility for grandfather

status any plans in existence on March 23, 2010 that an insurer subsequently modified in
certain ways. 45 C.F.R. 147.140. Under the rule, for example, a plan loses grandfather
status if an insurer makes any increase . . . in a percentage cost-sharing requirement.
45 C.F.R. 147.140(g)(1)(ii).
34.

With this rule in place, Defendant HHS has estimated that the percentage of

individual market policies losing grandfather status in a given year [will exceed] the 40 percent
to 67 percent range. 75 Fed. Reg. 34538, 34553 (June 17, 2010).
C. The Administrative Fix
35.

Because many individual health insurance plans neither qualified for

grandfathering nor complied with the ACAs eight federal market requirements, insurance
companies nationwide sent cancellation notices to their customers in the months before the
federal requirements took effect on January 1, 2014.
36.

These cancellation notices resulted in widespread criticism that President Obama

had violated his oft-repeated pledge that if you like your health care plan, you can keep your
health care plan. See, e.g., Barack Obama, U.S. President, Remarks by the President in Health
Insurance Reform Town Hall (Aug. 11, 2009), available at http://www.whitehouse.gov/thepress-office/remarks-president-town-hall-health-insurance-reform-portsmouth-new-hampshire
(attached as Exh. 2).

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37.

Congress began preparing to amend the Act in order to stop the cancellation of

health insurance plans. See, e.g., Keep Your Health Plan Act of 2013, H.R. 3350, 113th Cong.
(2013); Keeping the Affordable Care Act Promise Act, S. 1642, 113th Cong. (2013). West
Virginia and many other States support legislative solutions like these that could lawfully allow
individuals to keep their health insurance plans.
38.

The President, however, sought to preempt any congressional action that would

have addressed the problem legally and led to a permanent cure to the problem. In fact, he
formally threatened to veto a bill that would allow people to keep their individual health
insurance plans. Office of Mgmt. & Budget, Executive Office of the President, Statement of
Administration Policy, H.R. 3350 Keep Your Health Plan Act of 2013 (Nov. 14, 2013)
(attached as Exh. 3).
Instead, acting through Defendant HHS, the President unilaterally sought to fix

39.

the problem administratively for a limited period of timelong enough for him to avoid political
accountability.
a. The Presidents Announcement of the Administrative Fix
40.

On November 14, 2013, the President held a press conference to announce that he

and his Administration would do everything we can to fix this problem. Barack Obama,
President, Statement by the President on the Affordable Care Act at 2 (Nov. 14, 2013), available
at http://www.whitehouse.gov/the-press-office/2013/11/14/statement-president-affordable-careact (attached as Exh. 4) (hereinafter Presidential Press Conference). He stated: I completely
get how upsetting this can be for a lot of Americans, particularly after assurances they heard
from me that if they had a plan that they liked, they could keep it. And to those Americans, I
hear you loud and clear. Id.

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41.

The President explained his intent to take action through his administrative

agencies to allow insurers [to] extend current plans that would otherwise be canceled into 2014,
and [allow] Americans whose plans have been cancelled [to] choose to re-enroll in the same kind
of plan. Id.; see also Press Release, White House, Fact Sheet: New Administration Proposal to
Help Consumers Facing Cancellations at 1 (Nov. 14, 2013) (citing HHSs administrative
authority), available at http://www.whitehouse.gov/the-press-office/2013/11/14/fact-sheet-newadministration-proposal-help-consumers-facing-cancellatio (attached as Exh. 5) (hereinafter
Administrative Fix Fact Sheet).
42.

Essentially, he was going to extend the principle of the ACAs grandfathering

provision to those people whose individual health plans did not qualify under the grandfathering
rule. Presidential Press Conference, Exh. 4 at 2.
43.

The President acknowledged that state insurance commissioners still have the

power to decide what plans can and cant be sold in their states. Id. But, he explained, what
we want to do is to be able to say to these folks, you know what, the Affordable Care Act is not
going to be the reason why insurers have to cancel your plan. Id. at 4; Administrative Fix Fact
Sheet, Exh. 5 at 2 (Whether an individual can keep their current plan will also depend on their
insurance company and State insurance commissioner but todays action means that it will no
longer be implementation of the law that is forcing them to buy a new plan.).
b. HHS Formalizes the Administrative Fix as a Binding Rule
44.

The same day as the Presidents press conference, HHS announced that it would

suspend enforcement of these eight federal market requirements and that it would encourage
States to facilitate insurers issuance and consumers renewal of plans not compliant with the
federally mandated market requirements.

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45.

In a letter addressed to all state insurance commissioners, HHS committed not to

penalize the one-year renewal of individual non-grandfathered plans that, due to non-compliance
with the eight federally mandated market requirements, are prohibited by the ACA from being
renewed after January 1, 2014. See Letter from Gary Cohen, Director, CCIIO, to Insurance
Commissioners (Nov. 14, 2013), http://www.cms.gov/CCIIO/Resources/Letters/Downloads/
commissioner-letter-11-14-2013.pdf (attached as Exh. 6) (hereinafter Administrative Fix
Letter). The letter explained that HHS would not punish any such renewals made after January
1, 2014, and before October 1, 2014. Id.
46.

HHS stated its intent to give health insurance issuers the discretion to choose to

continue coverage that would otherwise be terminated or cancelled, subject to two conditions.
Id. at 1. First, the plan had to be in effect on October 1, 2013. Second, the insurance issuer has
to send affected customers a notice containing information about the Acts health insurance
exchanges and the federally mandated market requirements with which the plan is not
complying. Id. at 2. A week later, CMS promulgated forms that insurers must use for this
purpose. Gary Cohen, Director, CCIIO, Insurance Standards Bulletin Series INFORMATION
(Nov.

21,

2013),

http://www.cms.gov/CCIIO/Resources/Regulations-and-

Guidance/Downloads/standard-notice-bulletin-11-21-2013.pdf (attached as Exh. 7) (hereinafter


Insurer Disclosure Rule).
47.

If these conditions are satisfied, HHS committed unequivocally thatfor its

purposesan otherwise non-compliant individual health plan will not be considered out of
compliance with the [eight federal] market reforms. Administrative Fix Letter, Exh. 6 at 1.
48.

In short, the letter informed the States that, notwithstanding its statutory mandate

to enforce the eight federal market requirements, HHS will categorically refuse to enforce those

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requirements.

Instead of enforcing the federal requirements if a State lacks the necessary

authority or fails to substantially enforce a provision, 45 C.F.R. 150.203, as the ACA requires,
HHS has suspended its own enforcement entirely, provided the agencys conditions are met.
49.

The letter also expressly encouraged those State agencies responsible for

enforcing the specified market reforms to adopt the same transitional policy. Administrative
Fix Letter, Exh. 6 at 3. HHS recognized that individuals and insurance companies with plans
made unlawful by the ACA cannot benefit from the Administrative Fix unless their State also
chooses, consistent with the Administrative Fix, not to enforce the federally mandated
requirements and not to restrict the sale of such plans.
50.

Finally, the letter stated that HHS would consider whether to extend the

Administrative Fix beyond the specified time frame to which it had already committed. Id. at
1.
51.

On March 5, 2014, HHS extended the Administrative Fix by two years. See Gary

Cohen, Director, CCIIO, Insurance Standards Bulletin Series Extension of Transitional Policy
through

October

1,

2016

(Mar.

5,

2014),

http://www.cms.gov/CCIIO/Resources/

Regulations-and-Guidance/Downloads/transition-to-compliant-policies-03-06-2015.pdf (attached
as Exh. 8). (hereinafter Extension Rule).
52.

The agency committed to continue, for two additional years, not to penalize the

renewal of individual plans that are not grandfathered and not compliant with the eight federally
mandated market requirements. Id. at 2. Specifically, HHS will not punish any such renewals
for policy years that begin by October 1, 2016. Id.

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53.

In short, provided that the two conditions originally announced are met, HHS

promised not to act against individual health plans made unlawful by the ACA until just before
the next presidential election.
54.

Like the Administrative Fix, this Extension Rule recognized that it is now the

option of the States whether any individual health plans made unlawful by the ACA can be
sold within their borders. Indeed, HHS set forth specifically what actions States could take to
allow their citizens to benefit from the extended Administrative Fix. See id. at 2-3.
55.

HHS further stated in the Extension Rule that it would assess whether yet an

additional one-year extension of the Administrative Fix is appropriate. Id.


56.

Spokesmen for the President and HHS have repeatedly justified the

Administrative Fix as an exercise of agency enforcement discretion under Heckler v. Chaney,


470 U.S. 821 (1985). For example, a spokesperson for HHS stated: [A]gencies charged with
administering statues [sic] have inherent authority to exercise discretion to ensure that their
statutes are enforced in a manner that achieves statutory goals and are consistent with other
administrative policies. Agencies may exercise this discretion in appropriate circumstances,
including when implementing new or different regulatory regimes, and to ensure that transitional
periods do not result in undue hardship. Greg Sargent, White House Defends Legality of
Obamacare Fix, Washington Post, Nov. 14, 2013, available at http://www.washingtonpost.com/
blogs/plum-line/wp/2013/11/14/white-house-defends-legality-of-obamacare-fix/

(attached

as

Exh. 9).
c. A Binding Regulatory Framework
57.

The Administrative Fix is final agency action that sets out a substantive rule

binding on the agency, which the agency specifically designed as a norm or safe harbor by

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which [private parties] are expected to shape their actions. General Electric Co. v. EPA, 290
F.3d 377, 383 (D.C. Cir. 2002).
58.

The language and structure of the Administrative Fixs comprehensive change to

the federal enforcement regime, as well as the Defendants actions and statements, make clear
that the Administrative Fix is binding upon HHS:
a.

The Administrative Fix represents the official positions and actions of

HHS. All documents relating to the Administrative Fix and its extension were signed by
Gary Cohen, then-Director of CCIIO (a part of CMS, which is, in turn, a part of HHS).
b.

The agency documents use mandatory and decisive language reflecting the

binding nature of the agencys commitment to its decision not to enforce the ACAs eight
federal market requirements against individual health plans when its two conditions are
satisfied. E.g., Administrative Fix Letter, Exh. 6 at 1 (noting that plans will not be
considered to be out of compliance (emphasis added)); Insurer Disclosure Rule, Exh. 7
at 1 (same); Extension Rule, Exh. 8 at 1, 3 (same).
c.

The agency documents speak unequivocally about the ability of States and

insurers to permit the sale of individual health plans made unlawful by the ACA, as well
as the ability of consumers to purchase such plans, evidencing a commitment by HHS to
honor those choices notwithstanding the plain terms of the ACA. E.g., Administrative
Fix Letter, Exh. 6 at 1 (noting that health insurers may choose to continue coverage that
would otherwise be terminated or cancelled, and affected individuals . . . may choose to
re-enroll); Insurer Disclosure Rule, Exh. 7 at 1 (same); Extension Rule, Exh. 8 at 1
(same); id. at 2 (noting that certain large businesses will have the option of renewing
their current policies . . . without their policies being considered to be out of compliance

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and that insurers may renew such policies); id. (noting the option of the States to
permit the sale of individual health plans made illegal by the ACA and that the States
may choose and can elect to do so).
d.

HHS has set forth procedures and provided a specific disclosure statement

that will be considered to satisfy the requirement to notify policyholders of the


discontinuation of their policies. Insurer Disclosure Rule, Exh. 7 at 2 (emphasis added);
see also id. at 2, 3.
e.

HHS has used language and taken actions that presume the Administrative

Fix is being and will be followed by the agency. See Extension Rule, Exh. 8 at 1
(observing that policies subject to the transitional relief are not considered to be out of
compliance (emphasis added)); CCIIO, Options Available for Consumers for Cancelled
Policies

(Dec.

19,

2013),

http://www.cms.gov/CCIIO/Resources/Regulations-and-

Guidance/index.html (follow Options Available for Consumers with Cancelled Policies


hyperlink) (attached as Exh. 10) (noting that [s]ome states have adopted the transitional
policy, enabling health insurance issuers to renew their existing [non-compliant] plans
and policies); Gary Cohen, Director, CCIIO, Frequently Asked Questions on Standard
Notices

for

Transition

to

ACA

Compliant

Policies

(Nov.

21,

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html

2013),
(follow

Questions on Transition to ACA Compliant Policies hyperlink) (attached as Exh. 11)


(providing answers to FAQs about the Administrative Fix).
f.

HHS has separately adopted binding rule changes to accommodate the

economic impacts of the Administrative Fix. On March 11, 2014, HHS finalized a rule
altering the reinsurance and risk corridors programs to mitigate the Administrative Fixs

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potentially destabilizing effects and financial costs to insurers.

See HHS Notice of

Benefit and Payment Parameters for 2015, 79 Fed. Reg. 13744 (Mar. 11, 2014) (to be
codified at 45 C.F.R. pt. 144, et al.).
g.

Then, on May 27, 2014, HHS finalized another rule amending the medical

loss ratio program and further altering the risk corridors program based, again, on the
potential financial impacts of the Administrative Fix.

See Exchange and Insurance

Market Standards for 2015 and Beyond, 79 Fed. Reg. 30240 (May 27, 2014) (to be
codified at 45 C.F.R. pt. 144, et al.).
h.

Finally, States, members of Congress, and market observers have all

uniformly understood the administrative fix to be a binding agency pronouncement. In


particular, States have permitted the sale of non-compliant individual health plans within
their borders based upon HHSs commitment, and insurance companies have extended
such plans in those States.
59.

Despite HHSs clear intent that the Administrative Fix function as a binding rule,

HHS did not provide any notice to the public or opportunity to comment before finalizing the
Administrative Fix.
d. Turning States from Optional Enforcers Within a Cooperative Federalism
Regime Into Federal Policymakers
60.

The Administrative Fix fundamentally changes the States enforcement role with

respect to individual health plans and the eight federally mandated market requirements.
61.

Prior to HHSs adopting the Administrative Fix, the States enforcement of the

eight federal market requirements took place within a cooperative federalism scheme. Under
that congressionally mandated regime, the States had the option of enforcing the federally

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mandated requirements against non-compliant individual health plans, but if the States did not do
so, HHS had a mandatory obligation to enforce the requirements.
62.

Thus, under the regime provided by the ACA, the States lacked the authority to

determine whether individual health plans made unlawful by the ACA would be sold within their
borders. Whatever a State decided to do, the sale of non-compliant plans would be punished
either by the State or by HHS.
63.

The Administrative Fix changed both the federal and state enforcement roles. As

HHS has expressly recognized in communications to the state insurance commissioners, the
Administrative Fix leaves the enforcement of the eight federally mandated market requirements
with respect to non-compliant individual health plans entirely to the option of the States.
Extension Rule, Exh. 8 at 2.
a.

Under the Administrative Fix, HHS bound itself, notwithstanding its

statutory mandate, not to punish the sale of non-compliant individual health plans, so
long as certain conditions unrelated to the ACAs market requirements are met.
b.

This abdication of responsibility at the federal level shifts the enforcement

burden entirely to the States.


c.

Although each State has the same decision to make about enforcement that

it had before the Administrative Fix, the effect of that decision is fundamentally different.
Before the Administrative Fix, a States enforcement decision could not change whether
non-compliant individual health plans could be sold within the State. But after the
Administrative Fix, each States decision is dispositive on that question. If a State
chooses not to enforce the eight federally mandated requirements, those plans that satisfy

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HHSs conditions will be permitted to be sold. If a State chooses to enforce the federally
mandated requirements, however, none will be sold.
d.

The Administrative Fix gives States the exclusive authorityand

burdento decide whether non-compliant individual health plans that satisfy HHSs two
conditions will be sold in their States. No federal executive agency or officer will
prohibit such sales.
64.

By changing the States enforcement roles, the Administrative Fix forces States to

become federal policymakers. States now fully control the extent to which the eight federally
mandated market requirements will be enforced within their respective States.
65.

This is not a situation in which the federal government has chosen not to regulate

health insurance, leaving the States free to regulate (or not) according to state law as they see fit.
66.

Instead, the ACA prohibits certain individual health plans as a matter of federal

law, and the Administrative Fix has now pushed onto the States the sole responsibility for
determining the effect to give that federal law.
D. Injury to the State of West Virginia from the Administrative Fix
67.

By fundamentally changing the cooperative federalism regime created by the

ACA for enforcement of the eight federally mandated market requirements against noncompliant individual health plans, the Administrative Fix has harmed all States, including the
State of West Virginia.
68.

First, the State has been injured by the Administrative Fix by being forced to

become the sole and exclusive enforcer of federal law within its borders.
69.

Second, the Administrative Fix reduced the political accountability of the federal

government at the expense of the States.

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70.

Prior to the Administrative Fix, there was no question that the federal government

was responsible for the ACAs policy consequences.

The federal governmentthrough

Congress and the Presidentadopted the ACA and its eight federal market requirements. Under
the cooperative federalism regime provided by the ACA, the States had no authority to decide
that individual health plans made unlawful by the ACA could be soldunpunishedwithin their
borders.

While the States could defer punitive enforcement to the federal government by

refusing to participate, the ACA gave the States no policymaking discretion over the ultimate
enforcement of federal law.
71.

Under the Administrative Fix, the lines of political accountability are far less

certain. By granting the States dispositive authority over the enforcement of the eight federal
requirements and turning the States into federal policymakers, the Administrative Fix createsat
a minimumconfusion as to which government is actually to blame for the ACAs policies.
That confusion exists regardless of whether the States choose to actually enforce the eight federal
requirements or not: in either circumstance, the States will be held at least partly accountable by
their citizens for having made a federal policy choice.
72.

Indeed, the Presidents self-described purpose in adopting the Administrative Fix

was to shift political accountability away from the federal government to the States. He said:
[W]hat we want to do is to be able to say to these folks, you know what, the Affordable Care
Act is not going to be the reason why insurers have to cancel your plan. Presidential Press
Conference, Exh. 4 at 4. He specifically noted that after adopting the Administrative Fix, it
would be the state insurance commissioners [that] still have the power to decide what plans can
and cant be sold in their states. Id. at 2; see also Administrative Fix Fact Sheet, Exh. 5 at 2
(Whether an individual can keep their current plan will also depend on their insurance company

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and State insurance commissioner but todays action means that it will no longer be
implementation of the law that is forcing them to buy a new plan.).
73.

Consistent with the Presidents goal of blurring political accountability, HHS

formalized the Administrative Fix by sending to all state insurance commissioners a letter that
made clear that the burden was on the States to decide whether to adopt the same transitional
policy. Administrative Fix Letter, Exh. 6 at 3.
74.

Similarly, in the Extension Rule, HHS repeatedly stated that enforcement was

now the option of the States and also described in detail the actions that States could (and
would need to) take to allow their citizens to benefit from the extended Administrative Fix.
Extension Rule, Exh. 8 at 2.
75.

The States are clearly the targets of the Administrative Fix.

76.

This blurred political accountability diminishes the sovereignty of West Virginia

and all other States by interfering with the relationship between state officials and their
constituents, inhibiting the ability of elections to properly hold government and public officials
accountable, and harming the reputation and dignity of the States and their officials and agencies.
See Gregory v. Ashcroft, 501 U.S. 452, 460 (1991) (Through the structure of its government,
and the character of those who exercise government authority, a State defines itself as a
sovereign.).
77.

This injury to state sovereignty occurs no matter what choice West Virginia or

any other State makes in response to the Administrative Fix.


78.

Eleven States, through their attorneys general, explained to HHS the unlawfulness

of the Administrative Fix in a letter dated December 26, 2013, commenting on a proposed rule
altering the reinsurance and risk corridors programs to mitigate the Administrative Fixs

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potentially destabilizing effects and financial costs to insurers. See Letter from Patrick Morrisey,
West Virginia Attorney General et al., to Kathleen Sebelius, Secretary, HHS (Dec. 26, 2013)
(attached as Exh. 12). HHS has never responded to this letter or the allegations therein.
79.

These States all agreed that their citizens should be able to keep their health

insurance plans if they like them. The States objected to the Administrative Fix, however,
because it is flatly illegal under federal constitutional and statutory law. Id. at 1. The States
explained: We support allowing citizens to keep their health insurance coverage, but the only
way to fix this problem-ridden law is to enact changes lawfully: through congressional action.
Id. at 1.
E. The State of West Virginia Responds to the Administrative Fix
80.

On November 21, 2013, the West Virginia Insurance Commissioner, Michael D.

Riley, publicly stated that he would not take the steps encouraged by HHS to accommodate the
Administrative Fix. Press Release, West Virginia Offices of the Insurance Commissioner, West
Virginia Makes Announcement on CCIIO Re-enrollment Proposal (Nov. 21, 2013) (attached as
Exh. 13).
81.

The Insurance Commissioner explained that the abrupt Administrative Fix

comes at a time when West Virginia employers, citizens and insurance carriers have already
made extensive changes to comply with the new law. Id. In order to avoid further confusion,
provide market stability, mitigate potential rate impacts of the CCIIO proposal, and regulate the
West Virginia insurance market in accordance with the existing law, the Commissioner further
explained, we have decided to maintain our current direction. Id.
82.

On April 10, 2014, the Insurance Commissioner responded to HHSs extension of

the Administrative Fix. See, e.g., Lydia Nuzum, Non-Compliant Insurance Plans Get 3-Year

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Stay,

Charleston

Gazette,

2014

WLNR

10711115,

Apr.

19,

2014,

available

at

http://www.wvgazette.com/article/20140419/GZ01/140419179 (attached as Exh. 14).


83.

The Commissioner chose then to take the steps encouraged by HHS under the

Extension Rule. He committed not to restrict the renewal of certain non-compliant plans for
policy years that end by October 2017. The Commissioner explained that it is now up to the
carriers as to whether they want to offer non-compliant plans through that much longer
period. Id.
F. The Federal Executive Branchs Pattern of Unlawfully and Unilaterally Amending
or Suspending the Enforcement of Federal Statutes
84.

The Administrative Fix is part of a larger pattern and practice by this

Administration, which shows that the Administration is capable of reinstituting the


Administrative Fix even if it expires before judicial review runs its course.
85.

On several occasions in different contexts, federal officials have stated that they

will not enforce a federal statute at all or will suspend it for a selected category of people, often if
certain conditions are met. For example, according to then-Secretary Kathleen Sebelius, the
Administration has implemented a number of changes in the way the [ACA] was written.
Hearing on the Presidents Fiscal Year 2015 Budget Proposal with U.S. Department of Health
and Human Services Secretary Kathleen Sebelius Before the H. Comm. on Ways and Means,
113th Cong. (2014).
86.

These actions are often justified on the same basis as the Administrative Fixas

enforcement discretion under Heckler v. Chaney, 470 U.S. 821 (1985), even though Heckler
provides no such authority. And like the Administrative Fix, many of these actions also purport
to be temporary or transitional with time frames potentially shorter than the time necessary

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for full judicial review. Many were also an attempt to short-circuit Congress by precluding a
legislative fix.
a. Suspended Enforcement of Federal Statute
87.

In June 2012, the Homeland Security Secretary halted deportations for all

undocumented immigrants who meet certain age, educational, and other conditions.
Memorandum from Janet Napolitano, Secretary of Homeland Security, to David Aguilar, Acting
Commissioner, U.S. Customs and Border Protection, et al. (June 15, 2012) available at
http://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-whocame-to-us-as-children
.pdf (attached as Exh. 15).
88.

According to HHS, the same enforcement discretion at work in this immigration

policy is at work in the Administrative Fix. When the President announced the Administrative
Fix, an HHS spokesperson stated: HHS . . . will be using its enforcement discretion to allow
for this transition. Enforcement discretion can be used generally in transitions, as well as a
bridge towards legislation. This is something that has been used, for example, with the deferred
action for childhood arrivals policy, pending immigration reform. Transcript, White House
Background Briefing on Plan to Allow Insurers to Continue Offering Canceled Plans (Nov. 14,
2013) available at http://www.washingtonpost.com/politics/transcript-white-house-backgroundbriefing-on-plan-to-allow-insurers-to-continue-offering-canceled-plans/2013/11/14/1c961e4e4d59-11e3-ac54-aa84301ced81_story.html (attached as Exh. 16).
b. Unilateral Changes to Federal Statutes
89.

First, on July 12, 2012, the Administration claimed the authority to suspend the

federally mandated work requirement set forth in the Personal Responsibility and Work

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Opportunity Reconciliation Act of 1996, PL 104193, Aug. 22, 1996. The statute specifically
provides that waivers shall not affect the applicability of the mandatory work requirement. 42
U.S.C. 615(a)(2)(B).

But the Administration notified States of the HHS Secretarys

willingness to exercise her waiver authority to eliminate the laws work participation
requirement if the States meet a series of agency-imposed requirements, such as creating a set of
performance measures.

Office of Family Assistance, TANF-ACF-IM-2012-03 (Guidance

concerning waiver and expenditure authority under Section 1115) (July 12, 2012) available at
http://www.acf.hhs.gov/programs/ofa/resource/policy/im-ofa/2012/im201203/im201203
(attached as Exh. 17).
90.

Second, on October 2, 2013, the Administration finalized a rule that purported to

grant premium subsidies to congressional employees who purchase health insurance through an
appropriate [Exchange] as determined by the Director of the Office of Personnel Management.
5 C.F.R. 890.201(d). This action plainly contradicts Section 1312(d)(3)(D) of the ACA, which
states: [T]he only health plans that the Federal Government may make available to Members of
Congress and congressional staff . . . shall be health plans that are created under this Act . . . or
offered through an Exchange established under this Act. 42 U.S.C. 18032(d)(3)(D). And
under federal law, premium subsidies are available to Members of Congress and their staffs only
through the Federal Employees Health Benefits Program, not through the ACAs Exchanges.
See generally 5 U.S.C. 8901-8914. No federal law permits large employers, including the
federal government, to subsidize employee coverage purchased through an Exchange.
91.

Third, on February 27, 2014, HHS announced that due to technical issues,

certain Exchanges may deem individuals eligible for retroactive federal subsidies to help offset
the price of insuranceeven if that insurance was purchased outside of an Exchange.

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CMS Bulletin to Marketplaces on Availability of Retroactive Advance Payments of the PTC and
CSRs in 2014 Due to Exceptional Circumstances (Feb. 27, 2014) (attached as Exh. 18). Yet the
ACA clearly states that federal subsidies shall be awarded only to those individuals enrolled in
an insurance plan through an Exchange. 26 U.S.C. 36B(b)(2)(a); 42 U.S.C. 18071(b)(1).
CLAIMS FOR RELIEF
COUNT ONE:
Violation of the Affordable Care Act and the Administrative Procedure Act
92.

The State of West Virginia incorporates by reference the allegations of the

preceding paragraphs.
93.

All rules and executive actions must be consistent with their authorizing statutes

and cannot be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law. 5 U.S.C. 706(2)(A).
94.

The Administrative Fix violates and is contrary to the Affordable Care Act, and is

arbitrary, capricious, and an abuse of HHSs discretion. 42 U.S.C. 300gg300gg-6, 300gg-8.


95.

The Act plainly states that if a State does not enforce the eight federally mandated

market requirements, and the Secretary makes a finding of that nonenforcement, the Secretary
[of HHS] shall enforce [the provisions of this part] insofar as they relate to the issuance, sale,
renewal, and offering of health insurance coverage. 42 U.S.C. 300gg-22(a)(2) (emphasis
added). The Act does not provide HHS any discretion (rulemaking or otherwise) to refuse
categorically to make a finding that the State has failed to enforce the eight federal market
requirements, and thereby suspend the ACAs eight federal market requirements or to convey
responsibility for these federally mandated requirements to the States. See Massachusetts v.
EPA., 549 U.S. 497, 527, 534 (2007).

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96.

The case-by-case enforcement discretion contemplated in Heckler v. Chaney, 470

U.S. 821 (1985), is not applicable both because federal law provides that HHS shall enforce
the eight market conditions where states decline to do so and because the Administrative Fix is
not a case-specific decision to decline enforcement.
97.

The State of West Virginia is therefore entitled to relief under the APA and the

Constitution and laws of the United States.


COUNT TWO:
Violation of the Notice and Comment Requirements
of the Administrative Procedure Act
98.

The State of West Virginia incorporates by reference the allegations of the

preceding paragraphs.
99.

The APA requires that all new or modified legislative rules go through statutorily

specified notice-and-comment procedures. See Am. Min. Cong. v. Mine Safety & Health Admin.,
995 F.2d 1106, 1112 (D.C. Cir. 1993).
100.

The APA provides that before an agency promulgates a rule, it must provide a

[g]eneral notice of proposed rule-making and give interested persons an opportunity to


participate in the rule-making through submission of written data, views, or arguments. 5
U.S.C. 553(b)-(c). As part of the notice-and-comment process, an agency must respond to
relevant and significant public comments, Home Box Office, Inc. v. FCC, 567 F.2d 9, 35 &
n.58 (D.C. Cir. 1977), and to those comments which, if true, . . . would require a change in [the]
proposed rule, La. Fed. Land Bank Assn v. Farm Credit Admin., 336 F.3d 1075, 1080 (D.C.
Cir. 2003) (internal quotations and citations omitted).
101.

The notice-and-comment requirement is a vital part of the APAs structure

because it assures that the agency will have before it the facts and information relevant to a

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particular administrative problem, as well as suggestions for alternative solutions. Guardian


Fed. Sav. & Loan Assn v. Fed. Sav. & Loan Ins. Corp., 589 F.2d 658, 662 (D.C. Cir. 1978).
102.

The Administrative Fix constitutes final agency action that is binding on its face

and in application, and was thus subject to the APAs notice-and-comment procedures.
103.

The Administrative Fix failed to comply with the APAs notice and comment

procedures.
104.

The State of West Virginia is therefore entitled to relief under 5 U.S.C. 702,

706(2)(A), (C), (D).


COUNT THREE:
Unlawful Delegation of Executive and Legislative Responsibility to the States
Art. I-II of the U.S. Constitution, ACA
105.

The State of West Virginia incorporates by reference the allegations of the

preceding paragraphs.
106.

The Administrative Fix unlawfully delegates federal executive and legislative

responsibility to the States.


107.

First, Article II vests [t]he executive Power . . . in a President of the United

States of America, who must himself take Care that the Laws be faithfully executed. U.S.
Const. art. II, 1, cl. 1; id., 3. While subordinate federal officers may help him execute the
laws, the President may not convey his responsibilities on non-federal entities with no
meaningful presidential control.
108.

Second, Article I, 1 of the Constitution vests [a]ll legislative Powers herein

granted . . . in a Congress of the United States. This provision permits no delegation of


[Congresss legislative] powers. Whitman v. Am. Trucking Associations, 531 U.S. 457, 472
(2001). As a result, when decision-making authority is conferred on a federal agency, there must

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be an intelligible principle to which the person or body authorized to [act] is directed to


conform. J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928).
109.

The Administrative Fix, however, leaves entirely to the States discretion whether

to enforce the ACAs eight federal market requirements within their respective borders. There is
no principle limiting that discretion.
110.

Moreover, the Vesting Clause also prohibits any delegation of regulatory power,

whether or not guided by an intelligible principle, to entities outside of federal agencies. Any
such entities must be limited to an advisory or subordinate role in the [federal] regulatory
process. Assn of Am. Railroads v. U.S. Dept of Transp., 721 F.3d 666, 671-73 (D.C. Cir.
2013), cert. granted, 82 U.S.L.W. 3533 (U.S. June 23, 2014) (No. 131080).
111.

Under the Administrative Fix, however, the States are not merely acting in a

subordinate or advisory role to federal regulators. They have improperly been given regulatory
power because HHS has specifically provided that it will refuse to honor its obligation to enforce
the federally mandated requirements where the States do not do so.
112.

Third, under established principles of statutory construction, federal agency

officials . . . may not subdelegate [any share in federal decision-making and enforcement
authority] to outside entitiesprivate or sovereignabsent affirmative evidence of authority to
do so. U.S. Telecom Assn v. F.C.C., 359 F.3d 554, 566 (D.C. Cir. 2004). An agency delegates
its authority when it shifts to another party the entire determination of whether a specific
statutory requirement . . . has been satisfied, id. at 567, or where the agency abdicates its final
reviewing authority, Natl Park & Conservation Assn v. Stanton, 54 F. Supp. 2d 7, 19 (D.D.C.
1999).

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113.

Far from providing such an express grant of sub-delegation authority, the ACA

creates a cooperative federalism scheme, under which the federal government alone has
mandatory enforcement authority if the States do not enforce the law.
114.

Fourth, the separation of powers requires all federal enforcement officials to be

appointed by federal processes and subject to removal by the President.

[A]nyone who

exercis(es) significant authority . . . or who performs a significant governmental duty . . .


pursuant to the laws of the United States is an officer of the United States and therefore must be
appointed pursuant to the Appointments Clause. Buckley v. Valeo, 424 U.S. 1 (1976) (per
curiam); see U.S. Const. art. II, 2, cl. 2. Likewise, the Constitution has been understood to
empower the President to keep [federal] officers accountableby removing them from office, if
necessary. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3146
(2010).
115.

The Administrative Fix, however, purports to force States to exercise significant

authority or perform a significant federal governmental duty pursuant to the laws of the United
States without being subject to federal appointment or removal.
116.

The State of West Virginia is therefore entitled to relief under the APA and the

Constitution and laws of the United States.


COUNT FOUR:
Violation of State Sovereignty Under the Tenth Amendment
117.

The State of West Virginia incorporates by reference the allegations of the

preceding paragraphs.
118.

The Tenth Amendment prohibits federal commandeering of States and their

officials.

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119.

In New York v. United States, the Court determined that [t]he Federal

Government may not compel the States to enact or administer a federal regulatory program.
505 U.S. 144, 188 (1992). And in Printz v. United States, the Court held that the federal
government cannot circumvent that prohibition by conscripting the States officers directly.
521 U.S. 898, 935 (1997).
120.

States are not mere political subdivisions of the United States.

State

governments are neither regional offices nor administrative agencies of the Federal Government.
The positions occupied by state officials appear nowhere on the Federal Governments most
detailed organizational chart. New York, 505 U.S. at 189.
121.

The prohibition on commandeering applies equally to the Executive Branch as it

does to Congress. See Printz, 521 U.S. at 925 (noting that the Federal Government may not
compel the States to implement, by legislation or executive action, federal regulatory
programs).
122.

The Administrative Fix runs afoul of the Tenth Amendment because it is an

attempt by the Executive Branch to make States part of the federal government. It confers on the
States the sole authority to determine the extent to which certain federal laws will be enforced
within their borders.
123.

The Administrative Fix turns States into federal policymakerswhich the federal

government has previously conceded constitutes unlawful commandeering. See Printz, 521 U.S.
at 927 (noting the United Statess argument that the constitutional line is crossed when
Congress compels the States to make law in their sovereign capacities).
124.

Moreover, the Supreme Court has stressed that the touchstone of the anti-

commandeering doctrine is whether the federal government has put States in the position of

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taking the blame for [the federal programs] burdensomeness and for its defects. New York, 505
U.S. at 168; see also NFIB, 123 S. Ct. at 2602 (Permitting the Federal Government to force the
States to implement a federal program would threaten the political accountability key to our
federal system.).
125.

That is precisely the point of the Administrative Fix: to shift political

accountability for the ACAs eight federally mandated market requirements and their
enforcement to the States.
126.

The State of West Virginia is therefore entitled to relief under the APA and the

Constitution and laws of the United States.


PRAYER FOR RELIEF
Wherefore, the State of West Virginia is asks this Court to enter an order and judgment:
A.

Declaring that the Administrative Fix is unlawful because it: (1) was issued in

violation of the ACA and the APA; (2) was issued in violation of the notice-and-comment
requirements of the APA, 5 U.S.C. 701-706; (3) constitutes unlawful delegation of federal
executive and legislative responsibilities; and (4) interferes with state sovereignty in violation of
the Tenth Amendment and broader constitutional principles of federalism and dual sovereignty;
B.

Remanding this case to HHS, to permit the Administration promptly to work with

Congress to address the fact that the ACA rendered millions of Americans health insurance
plans unlawful, see, e.g., Rodway v. U.S. Dept. of Agriculture, 514 F.2d 809, 81318 (D.C. Cir.
1975);
C.

Awarding the State costs and attorneys fees pursuant to any applicable statute or

authority; and

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D.

Awarding the State such additional relief, including equitable injunctive relief, as

the Court deems appropriate.

Dated: July 29, 2014

Respectfully submitted,

Patrick Morrisey (DC Bar 459399)


Attorney General of West Virginia
s/ Elbert Lin
Elbert Lin (DC Bar 979723)
Solicitor General
Misha Tseytlin (DC Bar 991031)
Deputy Attorney General
Julie Marie Blake (DC Bar 998723)
Assistant Attorney General
Office of the Attorney General
State Capitol Building 1, Room E-26
Charleston, WV 25305
Telephone: (304) 558-2021
Fax: (304) 558-0140
E-mail: elbert.lin@wvago.gov
Counsel for Plaintiff the State of West Virginia

33